Repost from Business Green
Report: Oil price crash stalls more than $100bn of fossil fuel investment
Research on behalf of the Financial Times shows oil majors have shelved or delayed 26 schemes, including nine tar sands projectsBy Jessica Shankleman | 19 May 2015
Oil majors have put more than $100bn of investment in new projects on ice in response to the plunge in oil price, new analysis by consultancy Rystad Energy revealed today.
The study, commissioned by The Financial Times, shows that 26 projects in 13 countries have been delayed or axed since oil prices started to tumble last year, including nine Canadian tar sands schemes.
The revelation follows warnings from analysts such as the Carbon Tracker Initiative that capital and carbon intensive projects such as tar sands developments and deep sea drilling operations will struggle to turn a profit if oil prices remain low.
The price of oil crashed to $45 per barrel in January from a high of $115 in June 2014 as a result of surging output of US shale oil and lower than expected demand in Asia. The downward trend in prices was further accelerated by the decision of the Organization of the Petroleum Exporting Countries (Opec), led by Saudi Arabia, to resist calls for it to curb supplies in a bid to protect prices.
As a result, companies such as Royal Dutch Shell, BP and Statoil have been forced to shelve some of their costlier projects.
The analysis shows that at least $118bn of investment has been hit, which is likely to delay future production by as much as 1.5 million barrels per day. This in turn could lead to a substantial rebound in the price of oil, said Rystad.
The report follows a series of studies that have warned capital intensive fossil fuel projects could become stranded assets if the transition to a low carbon economy leads to tighter environmental regulations and reduced demand for fossil fuels.
The findings come after a report from the Institute for Energy Economics and Financial Analysis (IEEFA) yesterday showed how coal company stock prices have collapsed in recent years, concluding that the industry now faces a “grim outlook” as a result of tightening environmental legislation and increasing stranded asset risks.
Moreover, yesterday saw the University of Oxford confirm it will not invest in coal and tar sands as part of its ethical policy to fight climate change.